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January 22, 2015 11:00 PM

Universal American still bullish on ACOs, as it exits more

Melanie Evans
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    Insurer Universal American further scaled back its participation in the Medicare Shared Savings Program in the final months of last year, exiting another six accountable care organizations.

    The publicly traded health insurer remains the largest single participant in the Shared Savings Program, Medicare's aggressive push into the alternative and largely untested payment model known as accountable care. The latest withdrawal leaves Universal American with 24 ACOs after it also consolidated two and earlier exited three others.

    CEO Richard Barasch said he is “bullish” on the company's remaining ACOs and Medicare's accountable care effort after the CMS released proposals to change how the Shared Savings Program operates.

    The proposals, released in early December, would allow ACOs to avoid financial risks for six years instead of three, but also would create new options for ACOs eager to accept risk in exchange for potentially larger rewards. The rules also invited ACOs to propose changes to how financial awards are calculated and how to identify patients involved in ACOs.

    Rules that put ACOs at a disadvantage were the primary reason Universal American decided to exit some agreements, Barasch said. ACOs in efficient markets found it harder to produce savings needed to earn financial awards, he said.

    ACOs that operate where a local hospital lacks competition also may struggle, he explained. In a “very small minority” of cases, poor physician engagement prompted the company to leave an ACO, he said.

    Medicare has rapidly expanded its use of accountable care even as hospitals and doctors involved in the effort have produced uneven results. Some threatened to withdraw without significant changes to the rules and fewer financial risks.

    Unlike standard Medicare payment for each test, procedure or office visit, accountable care offers hospitals and doctors financial incentives to meet targets for quality and the total cost of patients' care.

    Universal American was among the first to enter Medicare's accountable care effort, which began in 2012 with 27 agreements and has expanded to roughly 400 accountable care contracts that seek to manage the cost and care for 7.2 million patients.

    The company had invested $82 million in its accountable care strategy through the third quarter of last year, the most recent data available. For that quarter, the company saw its first revenue from ACOs—$13 million.

    The Accountable Care Coalition of Caldwell County, one of the ACOs Universal American dropped, has notified Medicare of its plan to exit the Shared Savings Program, said Danny Morgan, an executive in business development with Caldwell UNC Health Care, the Lenoir, N.C.-based hospital that partnered with the company in the ACO.

    The hospital partnered with Universal American because the cost to finance its own data analytics was too great, Morgan said. The cost of compliance and the disruption to its physicians was not worth continued investment in the program, he said.

    The ACO failed to earn a bonus in the second year despite achieving significant savings because the hospital's documentation of quality performance did not meet Medicare criteria, he said. The ACO notified Medicare patients of its plans to exit, but continues to provide care management and other services to reduce readmissions and bolster quality, he said.

    “I don't think there's enough money in it to make it worth your while, but we haven't abandoned the whole philosophy,” he said.

    Follow Melanie Evans on Twitter: @MHmevans

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